The access to finance conundrum

The availability of finance is a key strategic issue for the Northern Ireland economy where a lack of bank lending has been cited as one of the factors inhibiting our recovery.

The problems are huge. The collapse of some global financial institutions led to government bailouts that in turn have led to sovereign debt problems and a threat to the euro.

International action and action by national governments has had a focus on both making financial systems safer and on rebuilding and recapitalising banks so that lending can flow again. The journey to recovery has been difficult and our local position, where the structure of our local banking system has close links to the problems in Ireland, has meant our feeling the issues more severely than other parts of the UK.

But I do now feel that we can begin to be more optimistic about the future on this issue. The Enterprise Minister and I have just completed a series of meetings with all of our local banks and I recently met with the National Asset Management Agency's (NAMA) Northern Ireland Advisory Committee. I am in no doubt that significant progress has been made.

Without exception all of our banks have healthy capital and liquidity positions and hence they do have money to lend to good projects. But they also suggested that a lack of demand is a particular problem. I have no doubt that a lack of confidence is a major issue given the economic climate, but our recovery depends on businesses taking bold steps to hit the 'go button' on the investment projects or business opportunities they have.

I know that the cost and conditions of credit are factors here. While I have been pressing the banks on this, we need to recognise the costs will unfortunately be higher than pre-financial crisis. And where stability and security are now paramount, we also need to accept that more scrutiny will be required – though achieving the right balance here is crucial. Mortgages associated with impaired property loans are also restricting otherwise viable businesses in accessing finance. The banks themselves recognised that and committed to looking at ways in which lending could be made available as part of a wider financial and business response to this.

I have also been stressing with the Treasury how important it is that national initiatives to improve liquidity are effective in this part of the UK. I had a very serious concern that this hadn't been the case in the past. Thankfully, the new Funding for Lending Scheme introduced by the Government appears to be receiving a positive response with its design being viewed favourably by the banks – Ulster Bank, Barclays and Santander are already participating.

I am particularly pleased at the progress that NAMA has made in managing its portfolio of loans and associated assets. Our first worry was that they would carefully manage these assets and play a positive and constructive part in the local property market. The NAMA Chairman has always assured me that their strategy is to sell assets in a phased and orderly manner, and that they would neither engage in a firesale nor hoard assets. They have delivered on this.

NAMA have also made it clear to me and want it to be widely known that they have the ability to lend to both debtors and potential investors to develop assets. In the last year they have already made £100m of lending available to Northern Ireland debtors to develop their assets. The Agency also made vendor finance available to help investors seeking to acquire property locally.

Banking has been a matter of huge concern for me for some three years now. Slowly but surely we are making progress. The DETI Minister and I will continue to work with and to press the banks and the Government to take all steps necessary to ensure our banking system is stable, secure and is making lending available at affordable terms. The Secretary of State for Northern Ireland has also offered to assist where possible and we will shortly be meeting with her on this.

It is my hope and those of the Executive that we will now see banks playing a more constructive role in our local economy going forward.